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By Willa Holland
The COVID-19 pandemic has disrupted the company’s global businesses: Diageo has lost revenue in markets due to lockdowns, and the fact that some countries have placed bans on alcohol. It is also facing higher expenses. On the bright side, the company should benefit in FY21 from the consumer stockpiling of wines and spirits. We also like Diageo’s geographic diversity and its ability to benefit from growth trends in the beer and spirits businesses. Our long-term rating remains BUY, as we believe that efforts to reallocate resources and invest in the company’s most promising products bode well for future growth.
On August 4, 2020, Diageo reported preliminary results for fiscal 2020 (ended June 30, 2020). Diageo reported that FY20 net sales fell 8.7% to 11.8 billion pounds ($15.3 billion) implying an 11% volume decline. The decline was driven by weak sales of Guinness, Scotch, and Vodka, offset in part by strong sales of Tequila and Whiskey in North America. Organic revenue fell 8.4%, a 7.3% decline, driven by the negative impact of COVID-19 in the second half. Organic operating profit fell 14%, reflecting volume declines, lower organic revenue, and cost increases, offset in part by productivity gains.
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There was a 13% decline in organic operating profit. Fiscal 2020 operating earnings fell to $5.51 per ADS, down from $6.74 in fiscal 2019. The company remains committed to paying its ordinary dividend and made a payment of $1.36 per ADR on April 14. In early 2019, Diageo sold 19 mostly lower-priced brands to Sazerac, a privately held American distiller that makes Southern Comfort whiskey. Sazerac paid $550 million in cash for the brands. Diageo will use the $340 million in after-tax proceeds to repurchase shares, invest in key brands, and boost organic revenue growth.
At about 2-times sales, Diageo appears to have obtained a reasonable price for the divested brands, which include Seagrams VO Canadian whiskey, Sambuca, Yukon Jack, and Goldschlager cinnamon schnapps. The transaction is expected to benefit earnings in the U.S. over the next several years as Diageo pursues its ‘premiumization’ strategy by selling large volumes of higher-margin wine and spirits. We estimate that the transaction and subsequent investments in core brands will add about 20 basis points to organic revenue growth over the next several years. However, the divestitures are unlikely to move the needle enough for us to revise our earnings estimates.
EARNINGS & GROWTH ANALYSIS
We are reducing our FY21 earnings estimate to $5.90 from $6.40 per share and setting an FY22 estimate of $6.50. Our revision reflects pandemic pressures, difficulties foreign exchange headwinds in various markets. Our organic growth estimates are down slightly from our prior estimates. We see organic revenue growth of just under 3, reflecting 0.1%, and organic operating profit growth of 4.0% (down from 4.2% previously), with the bulk of the growth occurring in the second half of FY21. However, we expect continued challenges in the first half. We believe that share repurchases are unlikely to resume at least not until the company’s net debt/EBITDA ratio improves.
FINANCIAL STRENGTH & DIVIDEND
Our financial strength rating on Diageo is Medium. In FY20, Diageo arranged a 2.5 billion euro credit facility and took other steps to bolster liquidity. Net debt at the end of FY20 totaled just under 7.9 billion euros and was 3.0-times EBITDA, up from 2.5-times in FY19. The full-year ROIC decreased 260 basis points to 12.8%. Diageo remains committed to paying a dividend and we expect another increase over the next 12 months. The company paid a dividend of $2.00 per ADR on August 8, reflecting a 2.9% decrease. $4.00 (reduced from $4.20) is expected for FY21 and $4.40 for FY22.
MANAGEMENT & RISKS
Operating in about 80 countries, Diageo is exposed to significant foreign currency and commodity price risks. It also relies on acquisitions to help drive earnings growth, and its share price could be hurt if these purchases fail to generate the expected cost and revenue synergies. Ivan Menezes succeeded Paul Walsh as CEO in 2018. Mr. Menezes faces a range of challenges, including disappointing sales of Smirnoff in the U.S. and decelerating growth in emerging markets.
Diageo plc, manufactures, markets, and sells alcoholic beverages worldwide. The company offers a variety of brands in the spirits, beer, cider, and wine categories. DEO’s brands include Johnnie Walker, Crown Royal, J&B, and Windsor whiskies; Smirnoff, Ciroc, and Ketel One vodkas; Captain Morgan, Don Julio, Tanqueray, and Guinness. Diageo plc was established in 1886 and is based in London.
Oge Energy Corp
EARNINGS & GROWTH ANALYSIS
Our revised estimates assume continued low natural gas prices as well as lower earnings distributions from Enable Midstream. At the same time, we see annual kilowatt-hour sales growth of an above-average 1.2%-1.3%, brought about by the addition of new generating assets.
FINANCIAL STRENGTH & DIVIDEND
OGE Energy plans to increase capital expenditures for electric system reliability upgrades in 2021 and 2022, and its strong cash flow should cover almost 70% of this cost. In addition, we believe that OGE will maintain its disciplined approach to capital spending. We expect $1.57 in 2020 and $1.63 in 2021. 5.4% of which should provide downside support for the stock and be attractive to income-oriented investors.
MANAGEMENT & RISKS
Sean Trauschke is the CEO of OGE Energy Corp. and OG&E. He has been the CEO of the company since June 2015 and has been on the board of OGE Energy and OG&E since May 2015. Stephen Merrill has been the CFO of OGE Energy Corp. since July 2014. He previously served as EVP of Finance at Enable Midstream Partners. His career boasts of 30 years of diversified experience in the oil and natural gas industries.
OGE is also the holder of a 26.3% general partner interest in Enable Midstream Partners LP, a natural gas pipeline and processing business with operations in Oklahoma and Texas. We view the company’s visible forward earnings stream and attractive integrated structure, along with management’s demonstrated execution ability, as compelling reasons for investors to maintain their current positions.
Catalent is ramping up its production capacity to manufacture potential coronavirus vaccines and has agreements with three of the leading vaccine developers – Johnson & Johnson, Moderna, and AstraZeneca. It has also significantly expanded its manufacturing capacity for cell and gene therapies. The company reported strong fiscal 4Q20 results on August 31. Adjusted EPS rose 29% to $0.90 and topped the consensus estimate by $0.12. GAAP net income was $134.8 million or $0.85 per share, compared to $65.7 million or $0.44 per share a year earlier.
Revenue totaled $947.6 million (+31% as reported; +22% on an organic basis). Revenue was driven by both organic growth and acquisitions. These include the purchase of cell and gene therapy businesses and the acquisition (from Bristol-Myers Squibb) of a manufacturing and packaging facility for biologics, sterile products, and oral solid dose products in Italy. The company has also been expanding its manufacturing facility in Maryland. The company’s strongest 4Q growth was in the Biologics segment, which had revenue of $357.8 million (+102% reported; +66% organic). Organic growth was driven by U.S. drug product and drug substance offerings, and demand for vaccine services in the U.S. and Europe.
Despite significant spending on acquisitions and internal investments, profitability improved in 4Q. The adjusted EBITDA margin rose 70 basis points to 28.2%. For FY20, adjusted EPS rose to $2.11 from $1.81 a year earlier. GAAP net income was $173.0 million or $1.14 per share, compared to $132.0 million or $0.90 per share in FY19. Full-year revenue was $3.1 billion (+23% as reported; +12% on an organic basis).
Catalent ended fiscal 4Q20 with more than $1 billion in cash and cash equivalents. It raised $550 million in an equity offering in June. Catalent faces regulatory risks as its facilities, domestic and overseas, are regulated by the FDA and agencies in other countries. It faces integration risks as it acquires new facilities and businesses. It also faces operational risks as it expands production capacity in drug substance supply and in vial-filling and fill-finish.
Based in Somerset, New Jersey, Catalent has four operating segments: Softgel and Oral Technologies; Biologics; Oral and Specialty Delivery; and Clinical Supply Services. The company has facilities around the world.
CTLT shares are trading at 36-times our FY21 EPS estimate, above the average multiple of 26 for our coverage universe of life science stocks. However, we believe that the stock merits a premium valuation based on the company’s large addressable market in manufacturing vaccines and other biologic drugs, its ability to gain and expand manufacturing agreements with COVID-19 vaccine developers, and strong long-term growth prospects.
(Disclaimer: The article is sponsored and hence, promotes some commercial links.)
When it comes to our day-to-day life, there are several things which help us enhance our day with every step. One such thing is music. It enhances, motivates and boosts certain aspects of our personality in ways that may not come into notice. There have been several researches on how music affects human brain. Studies show it helps us in recovery and healing, and also, encouraging us to be better if exposed to the right kind and fit.
From kids to elderly, music as a commodity, can be consumed by all. It is the universal language that is spoken by each and every being, from animals to humans to plants, each respond to it in their own ways. Suffice to say, we are united by music and the effect it has over us. Plants, for example, grow better when exposed to good music. Many songs are being composed specifically to enhance and boost their growth. Same is the case for humans. For humans, the right kind of music can boost good health, physically as well as mentally. You might have noticed how in gyms, upbeat music is played. That is to channel energy into everyone present. It adds to the workout. Several researches around the world have shown better physical output when exposed to appropriate music. Fast paced songs with upbeat nature channeled speed and the slower ones slowed downs the listeners, without them noticing. The sub-conscious effects of music are continuously being studied.
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Our heart starts beating according to the music we are listening to.Unsplash
Listening to upbeat or happy music also reduces stress and pressure from our minds. Many people become relaxed while listening to calming music. This is why calming sounds are used during a yoga session. Classical music seems to have the same calming and soothing effect. Furthermore, classical music has much more advantages over metal or techno music, it has proven to enhance learning and improve sleep in its listeners. A study was conducted in which participants were divided in groups where one group was exposed to classical music, another to metal and last one was supervised without any music. The group exposed to classical music showed healthier sleeping pattern than the rest.
Also Read: Undiscovered Music Trends For Indian Music
Several brands and outlets encash on different characteristics of music. Calm and soothing music is used in spas to help customer relax. It is a known fact that our heart starts beating according to the music we are listening to. So, music with faster beats will have our heart beating faster and the slow one will have calmer effect. This is why slow music channels calm. And the same fact has led to faster and upbeat music being played in food outlets. A study conducted in a farm, where people were invited to have food, where one half was exposed to slower music and for other fast-paced music was played. Not only did the group exposed to fast-music ate faster but also ate more than the group who ate in slower one. Next time you are in a food outlet or a restaurant observe the kind of music they are playing and the eating pattern.
Music can even be a facilitator of communication. We can sometimes convey our thoughts through the medium of a song. Sometimes someone’s words justify our inner feelings better than us. Or sometimes a song brings back certain memory or a place, and takes us to that certain moment. To say music is a time-machine would not be wrong. It is a dynamic blessing that can be used throughout our lives.
Key Words: Music, Calm, Soothing, Effects of Music
As more and more people are acknowledging the importance of their mental well-being, the wave of awareness the acknowledgment has brought is unprecedented. It may not have paved a clear path towards complete healing but it certainly has shown the way. The awareness is the key to heal. Healing begins only after the problem is identified. Similar to physical illness, the identification of the problem area is the first step. Even in case of a minor wound, when we go to the hospital the nurse first locates the wound. They, then, ask how we got hurt and identify the nature of the wound. Only then, they clean, put ointment and wrap it up if it needs wrapping and protection from air and dust. Sometimes, that protection is not needed. The wound heals out in the open. Same goes when it comes to healing of a mental trauma or illness. Sometimes, we confine in professionals or our loved ones, in order to let it out and process it openly. Sometimes, the trauma reduces with time. In any way, being aware and vigilant is the way to go.
Being knowledgeable about life in general, opens many channels for you. Being knowledgeable about yourself, opens gates inside you that lead to spiritual and general awareness about the concept of self. And the inner awareness is not necessarily internal, it can be seen from the outside as well. When we have positive energy from within it radiates physically as well. Have you encountered someone who’s spiritually awakened and aware? Do they stand out in the crowd? There are prominent examples of people who have made their mark in history, there is Swami Vivekanada, his awakening has revolutionised generations, one live example we can witness is The Dalai Lama.
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Healing is part of the spiritual journey.Unsplash
Also Read: Follow These Tips For a Better Mental Health
Awareness is the first step towards the staircase of spirituality. Healing is part of that journey. In our world, we go by our lives without paying much attention to causes of our actions. Every little thing we do, we do it for a reason. We might be suffering without being aware of it. There might be certain actions which are screaming those are trauma-response and not really us. But we go by our days, without paying heed to the fact that it really is the small actions that carry weightage in our lives. When we become attentive and thoughtful with what we do, we introspect, and then act. Thoughtless actions do not bear much fruit anyway. Thoughtfulness not only benefits us personally, but makes world a better place to live in. It really is the need of the hour to introspect every little doing and if it does not fit with the idea of self, then, it is time to find the root cause of what has us where we are.
Being self-aware is crucial as a human quality as well. When we face our problems, we gain experience, that experience leads us to understand and empathise with others’ sufferings too. It is a wholesome development.
Key Words: Self-awareness, Spirituality, Thoughtfulness, Mental Health
Honestly, who hasn’t watched one of the epic series of HBO– Game of Thrones?
There’s no question that when the first episode of Game of Thrones was released on April 11, 2011, the youth population of the world became exuberant. The main reasons behind this reaction was, first, the theme of the show, and second, the hidden lessons which it put forward.
Some of the valuable lessons which the Game of Thrones taught us are:
1. The pack always survives. This aptly meant that whether your pack consists of your family or your friends, you are the strongest when you are surrounded by a support system. This is what Ned Stark taught his children, to be together when “the winter comes”.
2. Never forget who you truly are. One of the most important lessons was given by Tyrion Lannister. He taught us that we should never forget who we really are. This means that we must not forget our bad habits and where we lack. So, once we know who we are, no one could ever use our lagging points against us.
3. Reading is necessary. Tyrion Lannister said, “A mind needs books like a sword needs a whetstone.” There is absolutely no denying that reading is not a habit now-a-days, but a necessity. If you want to be sharp and smart, then you must devote sometime to books, for they would teach you a lot!
4. Always pay your debts. Well, one of the most philosophical and learned houses if Game of Thrones is House Lannister. And so, one of the sayings of their house is, “A Lannister always pays his debts.” From here we get another life lesson that we must always pay off what we owe from people.
5. Always believe, “You know nothing.” Ygritte said this to Jon Snow in a teasing manner. But, this is actually for all those who believe that they know each and everything. Well, never believe that you know everything. Always learn from new experiences and never hesitate to take advice from others.
So, these were five most significant lessons which the series Game of Thrones offered us. In reality, we all are aware of these lessons, but we never really work upon them. But now, let’s try to understand each lesson and become the heir someday!
Keywords: Entertainment, Game of Thrones, HBO, Series, Youth, Lessons.